alternative datasets are crucial for modern credit


As financial hardship becomes a reality for millions of people, the credit industry could play an important role in healing economies hit by COVID-19.

FinTech Magazine (FM) held a question-and-answer session with (AL), Vice President, Data Business, Consumer Information Services at Experian North America, to find out how the credit ecosystem has evolved, what technologies are being exploited, and the importance of alternative datasets.

FM: Please describe your role at Experian.

AL: I joined Experian in 2012. In my role, I oversee the management of products related to Experian’s traditional credit and alternative data assets, which include, but not limited to, credit scoring models and tools. .

FM: How has the credit ecosystem evolved in recent times?

AL: We have seen tremendous growth in the types and diversity of predictive data attributes used to assess consumer creditworthiness in lending decisions. This development is good news for lenders and consumers alike.

At the same time, we have seen a change in consumers’ willingness to provide additional information if this increases their possibilities of accessing credit. One example is the success we have had with , a free and one-of-a-kind tool launched in March 2019.

[Boost] allows consumers to add their payments for telecommunications and utilities on time, including Netflix, directly to their credit report for the opportunity to improve their credit scores. This marks a shift towards greater consumer control in the credit scoring process.

FM: Experian operates in an incredibly data rich field. How do you use this information?

AL: Artificial intelligence and machine learning have been a game-changer in extracting meaningful information from data.

Our integrated offer against fraud, , helps fight synthetic identity fraud by determining the authenticity of an identity used on a credit application. It does this by pinning Personally Identifiable Information included in an applicant’s credit report against Experian’s proprietary traditional and alternative data attributes.

In real time, lenders will receive a “yes” or “no” indicator on the requested credit report indicating whether the identity is a synthetic identity or not. This combination of data and technology has the potential to authenticate identities, increase request approvals, and prevent significant losses for lenders.

Experian is so confident in our solution that we will share loan losses on insured profiles with our clients if we are wrong, which is an industry first.

FM: Why are alternative datasets crucial for modern credit?

AL: As an immigrant to the United States, I understand the challenges of living with a limited credit history. After arriving [from Canada]It didn’t take me long to discover a principle that still rings true: An established credit history is the keeper of financial opportunity in America.

I know my story is common with over 100 million people in America who do not have access to fair and affordable credit, either because of limited or no credit history or because of unsafe credit scores.

A person with a limited credit history can make consistent, on-time payments for things like their cable, utilities, internet, or cell phone. These payment histories can demonstrate that an applicant can afford to repay a loan that they have applied for, even in the absence of sufficient traditional financial information.

By using alternative data in conjunction with traditional credit data, lenders can mitigate risk and keep the credit economy moving while helping consumers access the financial services they need.

FM: How do you ensure that the data collected is used ethically?

AL: At Experian, we believe we have a special responsibility to consumers, especially when it comes to creating greater financial inclusion.

All data used to assess a consumer’s creditworthiness is governed by the Fair Credit Reporting Act, which means that it is viewable, contestable and correctable by consumers.

FM: What role could the credit industry play in healing the post-COVID-19 economy?

AL: Improving financial access for consumers of thin files and invisible credit will play a critical role in our path to economic recovery.

While it is difficult to predict when the economy will return to pre-COVID-19 levels, it has never been more important to protect the financial health of consumers and to maintain the integrity and accessibility of the economy. credit economics.

Combining traditional credit data with alternative data to access consumer creditworthiness plays a critical role in achieving this. This will help determine a consumer’s stability, ability and willingness to repay in the current financial landscape and beyond.

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